GBP/ZAR Exchange Rate Falls, EU is ‘Not Willing’ to Renegotiate Irish Backstop with UK
The Pound South African Rand (GBP/ZAR) exchange rate fell today, leaving the pairing trading around R17.2762 as no-deal Brexit fears rose.
This follows a deadlock in UK-EU Brexit negotiations after Prime Minister Boris Johnson demanded the removal of the Irish backstop from the withdrawal agreement – a condition that the EU has consistently rejected.
A spokesperson for Downing Street said:
‘The EU has said up to now it is not willing to renegotiate [the backstop] … The prime minister would be happy to sit down with leaders when that position changes. But he is making it clear to everybody he speaks to that that needs to happen.’
As a result, Sterling traders have become increasingly jittery as a no-deal Brexit now looks more likely on 31 October.
Today also saw Mr Johnson clash with Leo Varadkar, the Irish Taoiseach, over the Irish backstop.
Mr Varadkar’s spokesman commented:
‘Noting that the Brexit negotiations take place between the UK and the EU, the Taoiseach explained that the EU was united in its view that the withdrawal agreement could not be reopened.’
ZAR/GBP Exchange Rate Edges Higher Despite Weak SA Unemployment Figures
The South African Rand (ZAR), meanwhile, failed to benefit from today’s SA unemployment rate figures for the second quarter, which rose from 27.6% to 29% – a 16-year high.
Statistics South Africa commented:
‘This is as a result of an increase of 455,000 in the number of people who are unemployed and an increase of 21,000 in employment.’
ZAR traders are also taking particular note of developments around Eskom – South Africa’s largest and most vital State Owned Enterprise and supplier of 95% of SA’s power – following news that it lost R20.7 billion over 2018 and 2019.
South Africa’s Government has proposed 59 billion rand stimulus, in addition to 230 billion rand bailouts spread over a decade, to aid the ailing state-run business.
However, many analysts are pessimistic, saying that these bailouts would fail to sustain Eskom in the long term.
GBP/ZAR Outlook: Sterling Could Fall on Heightened Brexit Uncertainty
South African Rand (ZAR) traders will be looking to tomorrow’s SA trade balance figures for June.
Any signs of improvement could provide a further boost for the ZAR/GBP exchange rate.
Pound (GBP) investors, meanwhile, will be awaiting tomorrow’s release of the UK GfK consumer confidence figures for July, which are expected to hold at -13.
The GBP/ZAR exchange rate is expected to remain volatile on Brexit developments over the course of the week, as tensions between the UK and EU are likely to rise over the Irish backstop.